What is a margin call in trading?

A margin call occurs when a trader's account balance falls below the required margin level mandated by their broker. In trading, margin refers to the funds necessary to maintain open positions, derived from borrowed capital and the trader's own equity. When market movements lead to a decrease in account equity, a broker may issue a margin call, requiring the trader to deposit additional funds or reduce positions to meet minimum margin requirements. Failure to do so may result in liquidation of positions to cover the shortfall. Margin calls serve as a risk management mechanism to protect both the trader and the broker from excessive losses.